Raps NCLAT for flouting established norms: SC sets aside NCLAT order stopping insolvency proceedings against Byju's

PTI New Delhi: In a major setback to Byju's, the Supreme Court on Wednesday set aside the National Company Law Appellate Tribunal's (NCLAT) verdict that had halted the insolvency proceedings against the embattled ed-tech firm and held US creditor firm Glas Trust Company LLC would have the locus to intervene. The top court verdict also came as a jolt for the Board of Control for Cricket in India (BCCI) as it annulled the NCLAT's order approving Rs 158.9 crore dues settlement of Byju's with the cricket board. A bench comprising Chief Justice of India (CJI) D Y Chandrachud and Justices J B Pardiwala and Manoj Misra directed the cricket board to deposit the settlement amount of Rs 158.9 crore with the committee of creditors (CoC).

As a result of the verdict, now Byju Raveendran and his brother Riju Raveendran will again lose control over "Think and Learn Pvt Ltd" or Byju's -- a company engaged in providing online educational services and the insolvency resolution professional (IRP) will be back at the helm. The bench held the US firm, being the creditor, had the locus to intervene in matters relating to the corporate insolvency proceedings at NCLT, NCLAT and in the apex court as an affected party. Writing a 61-page judgement on the plea of the US firm against the NCLAT verdict, the CJI, on the future course of action, said, “Parties are at liberty to invoke their remedies, to seek a withdrawal or settlement of claims, in compliance with the legal framework governing the withdrawal of CIRP (corporate insolvency resolution process).” “We allow the present appeal and set aside the impugned judgement of the NCLAT dated August 2… At this stage, it would not be appropriate for this court to adjudicate on the objections of the appellant to the settlement agreement on merits,” the verdict said.

It said the issues raised with regard to the insolvency were subject matter of several litigations at different fora, including the Delaware Court in the US, and investigation by various authorities, including the Enforcement Directorate. Nothing in this judgement should be construed as a finding on the conduct of any of the parties or other stakeholders involved in the insolvency proceedings, it said. “The amount of Rs 158 crore, along with accrued interest, if any, which has been maintained in a separate escrow account under the order of this court dated August 14, is to be deposited with the CoC. The CoC is directed to maintain this amount in an escrow account until further developments and to abide by the further directions of the NCLT,” it ordered. Byju's became the Indian cricket team sponsor in 2019 and the deal was worth Rs 4.61 crore per bilateral match and Rs 1.51 crore per match in an ICC tournament.

The company, which wins these rights, gets to have its name on the national jersey as the primary sponsor. The deal with Byju's was originally till 2022 but was extended till the end of 2023 ODI World Cup but Byju's failed to pay the sponsorship fee after June 2022. This led to a litigation by the BCCI at NCLT Bengaluru. The top court rapped the insolvency appellate tribunal, NCLAT, for flouting the established rules in stopping the insolvency proceedings against the ed-tech firm by taking recourse to its inherent powers.